University Course Planner The University of Adelaide Australia

MATHS 3012 - Financial Modelling: Tools & Techniques III

Career: Undergraduate
Units: 3
Term: Semester 2
Campus: North Terrace
Contact: Up to 3 hours per week
Available for Non-Award Study: Yes
Pre-Requisite: MATHS 1010 or MATHS 1011
Assumed Knowledge: Familiarity with Excel spreadsheets
Incompatible: APP MTH 3011, APP MTH 3012
Assessment: Ongoing Assessment 30%, Exam 70%
Syllabus:

The growth of the range of financial products that are traded on financial markets or are available at other financial institutions, is a notable feature of the finance industry. A major factor contributing to this growth has been the development of sophisticated methods to price these products. The significance to the finance industry of developing a method for pricing options (financial derivatives) was recognized by the awarding of the Nobel Prize in Economics to Myron Scholes and Robert Merton in 1997. The mathematics upon which their method is built is stochastic calculus in continuous time. Binomial lattice type models provide another approach for pricing options. These models are formulated in discrete time and the examination of their structure and application in various financial settings takes place in a mathematical context that is less technically demanding than when time is continuous. This course discusses the binomial framework, shows how discrete-time models currently used in the financial industry are formulated within this framework and uses the models to compute prices and construct hedges to manage financial risk. Spreadsheets are used to facilitate computations where appropriate. Topics covered are: The no-arbitrage assumption for financial markets; no-arbitrage inequalities; formulation of the one-step binomial model; basic pricing formula; the Cox-Ross-Rubinstein (CRR) model; application to European style options, exchange rates and interest rates; formulation of the n-step binomial model; backward induction formula; forward induction formula; n-step CRR model; relationship to Black-Scholes; forward and future contracts; exotic options; path dependent options; implied volatility trees; implied binomial trees; interest rate models; hedging; real options; implementing the models using EXCEL spreadsheets.

Course Fees

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  Commonwealth Supported Student Contribution
Tuition Fees
Units EFTSL Pre-2010 2010 Onwards Domestic International
3 0.125 Band 2 $1,131 Band 2 $1,131 select program select program


Course Outline

A Course Outline which includes Learning Outcomes, Learning Resources, Learning & Teaching for this course may be accessed here


Critical Dates

Term Last Day to Add Online Census Date Last Day to WNF Last Day to WF
Semester 2 Mon 07/08/2017 Thu 31/08/2017 Fri 15/09/2017 Fri 27/10/2017


Class Details

Enrolment Class: Lecture
Class Nbr Section Size Available Dates Days Time Location
24829 LE01 120 48 26 Jul - 13 Sep Wednesday 3pm - 4pm Badger, G31, Macbeth Lecture Theatre
27 Jul - 14 Sep Thursday 3pm - 4pm Engineering Sth, S112, Teaching Room
28 Jul - 15 Sep Friday 3pm - 4pm Badger, G31, Macbeth Lecture Theatre
4 Oct - 25 Oct Wednesday 3pm - 4pm Badger, G31, Macbeth Lecture Theatre
5 Oct - 26 Oct Thursday 3pm - 4pm Engineering Sth, S112, Teaching Room
6 Oct - 27 Oct Friday 3pm - 4pm Badger, G31, Macbeth Lecture Theatre